Canada's International Trade in Services Data quality, concepts and methodology

Transcription

1 Canada's International Trade in Services Data quality, concepts and methodology 1. Concepts International transactions in services are a major component of the Current account of the Balance of payments. Services are grouped under four major categories: travel, transportation, commercial services and government services. 1 Such services, together with goods, investment income and current transfers make up the Current account of the Balance of payments (BOP). 2 The Balance of payments of Canada measures the economic transactions of Canadian residents with the residents of other countries. Services covers a wide and complex variety of transactions on products that are generally intangible in nature. Unlike goods, services are not separate entities over which ownership rights can be established. They cannot be traded separately from their production. Services are heterogeneous outputs produced to order and typically consist of changes in the conditions of the consuming units realized by the activities of producers at the demand of the consumers. By the time their production is completed they must have been provided to the consumers. 3 Since, by nature, most services are not traded separately from their production, these transactions usually require the simultaneous presence of the producer and the consumer of the services. This simultaneity is not easily realized between countries where distance and political boundaries separate the supplier and client. This largely explains the lower volume of trade in services when compared with goods, where both the seller and buyer of goods remain in their respective domestic economies, while the goods they trade move across the border. International trade negotiations which extended in recent years to cover services and which have resumed at the World Trade Organization (WTO) have increased the demand to provide detailed breakdowns of service categories as well as data for individual countries. Canadian statistics on crossborder services are produced for over 40 categories based on the international standards initially set out by the International Monetary Fund in 1993 and subsequently extended by the OECD and Eurostat (the statistical arm of the European Union). 4 This breakdown is based to a significant extent in the Central Product Classification (CPC), 5 whose main objective "is to provide a framework for international comparison of various kinds of statistics dealing with goods, services and assets." 6 Since the CPC is also used by trade negotiators to classify services, a formal development of the link between the balance of payments classification and the CPC has various implications for data specification and development, which is driven, in part, by the requirements of the WTO. The definitions and breakouts now form a key chapter in a new manual on services trade data, approved by the United Nations Statistical Commission in March 2001 for international use. 7 Some 60 types of services are provided 1. The term "commercial services" is a grouping of convenience in the Canadian series and comprises all other services than travel, transportation and government. 2. For a further description of the Current account statement, please refer to Descriptions and Definitions in Canada s Balance of International Payments, First Quarter 2004, Statistics Canada, Catalogue X. 3. Eurostat, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations and World Bank, System of National Accounts 1993, (prepared under the auspices of the Inter-Secretariat Working Group on National Accounts, Commission of the European Communities, Brussels/Luxembourg, New York, Paris, Washington, D.C., 1993), paragraph 6.8, In 1996 the services data were converted to international reporting standards in order to improve the comparability of data among countries. The main changes for Canada are described in Canada s International Transactions in Services, 1994 and 1995, Statistics Canada, Catalogue X. 5. United Nations, Central Product Classification (CPC) Version 1.0, Statistical Papers, (Series M, No. 77, 1998). 6. International Monetary Fund, Balance of Payments Manual, (Fifth edition, IMF Publication Services, th Street NW, Washington DC USA, 1993), paragraphs 521, Manual on Statistics of International Trade in Services, United Nations Statistical Office, 2002 for the European Commission, International Monetary Fund, Organization for Economic Cooperation and Development, United Nations Conference on Trade and Development and the World Trade Organization. 80 Statistics Canada Catalogue no

2 for in what is known as the Extended Balance of Payments classification. These breakouts are linked more fully than earlier norms to the UN s Central Product Classification. 8 Services are largely traded by Canadian business corporations. A small portion is also traded by Canadian governments and their enterprises. Moreover, because Canada s balance of payments does not include a distinct account for labour income as called for by international standards, income from compensation of employees is treated as commercial services as if the employees were self-employed service providers. Data limitations restrict their identification. Special care needs to be taken in establishing the residency of the Canadian transactors involved for services, since it is not always clear if the services are provided by a resident or by a non-resident entity. For example, if a Canadian company has a subsidiary located in the United States, sales of services by the U.S. subsidiary to clients outside Canada are not to be recorded in Canada s balance of payments statistics, since such sales are considered as non-resident to non-resident transactions and, hence, beyond the balance of payments framework. Although this treatment also applies to goods and other accounts, corporations are often motivated to set up foreign concerns for the sole purpose of trading services. Sales outside the domestic economy are referred to as establishment trade (that is, trade arising from a business established abroad) or foreign affiliate trade in services (FATS). 9 Commercial presence trade (named after the third of four main channels for supplying services in the multilateral WTO General Agreement on Trade in Services [GATS]) is more narrowly defined, referring only to sales within the host market. The net profits of such foreign subsidiaries accruing to Canada are, however, recorded as direct investment income in the current account. This treatment is in keeping with the balance of payments and other national accounting principles that focus on cross-border activities of Canadian residents. A full discussion of the concepts and measurement of foreign affiliate trade statistics is also found in the new UN manual on services trade statistics noted above. 2. Sources Services can take numerous forms and thus entail a wide range of data sources. Significant portions of the data on services, particularly travel and commercial services, are derived from surveys. In addition, 40% of all receipts and about 30% of payments are based directly or indirectly on administrative records. For travel estimates, expenditure factors from survey sources are synthesized with administrative data on the number of travellers; from time to time, administrative data are also used in the verification of travel data. For commercial services and transportation services, survey data are the main source, with annual administrative data used to assess and improve survey results. Administrative data are largely used for government services. Benchmark indicators are used to derive certain service estimates for which current direct measures are not available. Finally, long established reconciliations of current account statistics with the U.S. Bureau of Economic Analysis has now led to some 13% of bilateral services data for Canada being supplied by the United States. 3. Methods Travel series are compiled by the Culture, Tourism and Centre for Education Statistics Division of Statistics Canada. All other services are compiled by the Balance of Payments Division drawing on diverse surveys and other sources from within and outside the Division. Details follow in the sections below for each major services account. 8. For a fuller discussion of these linkages please refer to Hugh Henderson, A Canadian Perspective of Linking Services Categories of the World Trade Organization and Balance of Payments Compilers, (lecture first presented at the Tenth Meeting of the International Monetary Fund Committee on Balance of Payment Statistics, Washington, D.C., Statistics Canada, Ottawa, October 1997). An updated version was presented at Statistics Canada, Economic Conference 2000, May 2000 under the title, On Building Bridges, A Canadian Perspective of Linking Services Categories of the World Trade Organization and the Balance of Payments Compilers. 9. For an illustration see Colleen Cardillo, Foreign Sales of Canadian Enterprises, (unpublished research paper, Statistics Canada, Ottawa, 1997). Statistics Canada Catalogue no

3 4. Products 4.1 Data accuracy and quality The quality of the data varies, from reliable in the case of commercial and government services to acceptable in the case of travel and transportation series. (For each of the accounts, a qualitative indicator has been adopted: most reliable, reliable and acceptable. By its very nature, this assessment is subjective in that it represents the professional judgement of statisticians as to the degree of error and bias, taking into account the available sources of information and the methodology used). 4.2 Data accessibility The quarterly and annual series on commercial services are published as total receipts, payments and balances in the quarterly publication Canada s Balance of International Payments (available in electronic format on the Internet) andincansim. In the present annual publication Canada s International Trade in Services (available in electronic format on the Internet) and in CANSIM, the annual series for services are published for the six geographical groupings: United States, United Kingdom, Other European Union, Japan, Other OECD and Other Countries. The annual services series are broken down among four major categories of services: travel, transportation, commercial and government, with a maximum detail of 42 categories for all countries in total. Total services are available for 59 countries (from 1990 through 2002 on CANSIM), as well as for 19 global trading areas. Each country and area has a breakout of travel; commercial services; and transportation and government services combined. The total for all services is also summarized by country and broad geographic regions of the world in Table 17-1 of this publication. In the past, the listing of world areas largely paralleled those in the presentation of trade data on goods on a customs basis, with which many users are already familiar. User preferences and the development of partner country compilations at the Organization for Economic Cooperation and Development however, have led to some modifications of geographic zones to align more closely with actual continental boundaries. For example Turkey and Egypt have been respectively shifted to Europe and Africa so that the Middle East region pertains only to Asia. The Antilles designates the Caribbean islands and Bermuda separately from Central America. Three OECD countries in eastern Europe together with Iceland are a sub grouping of Europe, and the Maghreb countries are a subgrouping of continental Africa. An estimate of the CARICOM countries joins the FTAA as a memorandum item. The great majority of detail is published separately for the United States as well. Starting with the 1997 edition of this publication, a quarterly breakout with sub-series under travel, transportation and commercial services was introduced from 1995 onward, both on a raw and seasonally adjusted basis. Quarterly travel data is broken down into two sub-categories, transportation into three, and commercial services into 14 components. 82 Statistics Canada Catalogue no

4 Travel 1. Concepts In conformity with international standards, travel covers purchases of goods and services by the following: persons travelling in another country for less than one year; persons travelling in another country for one year or more for medical or educational purposes; seasonal and border workers working in another country (cross-border workers); and crews of airplanes, ships, trucks or trains stopping off or laying over in another country. Purchases of goods and services consist of expenditures for food, lodging, recreation, gifts and other incidentals, as well as local transportation purchased in the country of travel. Travel excludes passenger fares for international travel, which are included in transportation. It also excludes spending of diplomats and military personnel on posting in host countries. Such personnel remain residents of their home countries, and their spending in the host countries is included in government services. However, visits in the interim, whether on leave or on official business, are considered part of travel. In Canadian statistics, an exception to international standards is cruise fares, which are excluded from travel and, instead, are classified in transportation. Furthermore, though Canadian travel statistics include the personal expenditures of cross-border workers in business travel, such expenses are not separately identified, as called for by international standards. Travel is subdivided into travel for business reasons and travel for personal reasons, an important distinction for the System of National Accounts. Expenditures by business travellers are part of the intermediate consumption of producers, whereas expenditures by other travellers on personal trips are part of household final consumption expenditures. In order to calculate final consumption expenditures of resident households from the expenditure made by all households, both resident and non-resident, within the domestic market, it is necessary to add direct purchases abroad by residents and to subtract direct purchases in the domestic market by non-residents Business travel Business travel covers the expenditures of travellers visiting another economy for business reasons-such as sales, marketing or commercial negotiations-and extends to expenditures by carrier crews stopping off or laying over, and employees of government and international organizations on official business. Business travel also covers expenditures by crossborder workers, but as mentioned above, insufficient data bar their identification as such in the Canadian statistics. 2 Business travel, like personal travel below, includes spending on goods for personal use as well as for accommodation, food, recreation and local transport. 1. Eurostat, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations and World Bank, System of National Accounts 1993, (prepared under the auspices of the Inter-Secretariat Working Group on National Accounts, Commission of the European Communities, Brussels/Luxembourg, New York, Paris, Washington, D.C., 1993), paragraph , p Limited provision for the income as opposed to spending of cross-border workers is included in miscellaneous commercial services, where they are treated as units of own-account labour, instead of labour income, as called for by international standards. Statistics Canada Catalogue no

5 1.2 Personal travel Personal travel covers travel for health, education and other personal reasons. This includes travel expenses of employees of international organizations when they travel outside their country of residence for personal reasons Health-related travel In theory, health-related travel refers to all expenditures in another country by medical patients. Persons accompanying or visiting such patients may also indicate the purpose of their travel as healthrelated. Two types of health-related services are covered in Canadian data: those by hospitals and those provided by physicians offices. The out-ofpocket expenditures on goods and services by persons travelling for health-related purposes should also be included here, but Canadian statistics record these expenditures in other personal travel, due to data limitations Education-related travel Again in theory, education-related travel should include all expenditures in another country by students. But for practical reasons, Canadian statistics include only outlays of post-secondary students; that is, only outlays on full-time university and college programs, which generally extend over more than one year, are included. Recorded outlays include all expenditures by post-secondary students studying abroad-that is, expenditures for tuition fees and course materials, together with accommodation and general living expenses. Except as incidentally covered in other personal travel, spending for primary and secondary schooling remains to be estimated in Canadian statistics. Certain further expenditures on institutional education (such as for personal interest courses) also remain in other personal travel because of data limitations. The fact that travel outlays are collected from the consumer rather than the supplier (see section 4.1) sets up a potential duplication between, for example, the foreign visitors spending on a commercial training course, and the same course reportable as earnings from abroad by the Canadian supplier. Historical response rates for the travel series, however, have made it difficult to establish that non-institutional education services as such would be extensively represented. All receipts and payments reported as commercial education in miscellaneous business services are accordingly included in the commercial services account. Self-employed earnings by instructors are outside the scope of travel, and are not surveyed in any case Other personal travel Other personal travel includes outlays for leisure travel, including participation in sports, artistic, cultural or recreational events. Spending on visits with relatives and friends and for religious purposes is also included here. As previously discussed, other personal travel also includes some expenditures on health and education that cannot be identified separately, for example, expenditures on full-time programs of less than a year as well as some spending by international students at elementary and secondary school levels. 2. Data sources The Culture, Tourism and Centre for Education Statistics Division of Statistics Canada compiles the basic Canadian travel statistics. These statistics are derived from a combination of census data and sample counts of travellers crossing the border, coupled with sample surveys used to collect specific information from travellers, including their expenditures and main purpose of visit (business or personal). 3 The Canada Customs and Revenue Agency collects information on the number of crossings at frontier ports and distributes the travel survey questionnaires. The frontier count is made by categories, based on mode of transportation (including, in the case of highway and ferry points, cars, trucks, motorcycles and bicycles). Complete counts are taken at all but seven points of entry where automobile, motorcycle and bicycle flows are estimated from samples. The questionnaires that collect the travel expenditure data are distributed according to 3. Publications by Culture, Tourism and Centre for Education Statistics Division provide additional descriptions of the sources, methods and quality of the travel series. For example, see Statistics Canada, International Travel, 2003 (Catalogue no X, January 2005). 84 Statistics Canada Catalogue no

6 pre-arranged schedules to non-resident 4 travellers upon entry to Canada, or to residents of Canada upon their return from travel abroad. Completion of the questionnaires is voluntary and travellers are asked to mail their completed questionnaires directly to Statistics Canada. Beginning with the reference year 2000 a new air exit survey introduced on site interviews for overseas travel at eight key airports. In business travel, estimates of spending by crews (of airplanes, ships, boats, trains and trucks) are calculated by the Culture, Tourism and Centre for Education Statistics Division. Historical series and recent extensions to coverage of health-related travel were developed by the Culture, Tourism and Centre for Education Statistics Division and the Balance of Payments Division. The receipts data for health consist of foreign spending for hospital services in Canada, as recorded from the annual hospital survey of the Canadian Institute for Health Information, with projections for recent years where survey results are not yet available. Recent estimates for physician services linked to U.S. data on the payments side were introduced with the 1995 reference year. The series on health-related payments was largely limited to hospital and physician charges as paid under provincial health plans for Canadian residents travelling abroad. Starting in 1995, access to U.S. sources has enabled a fuller estimate covering payments beyond provincial health plans at major medical centres and university hospitals. On the receipts side of the education series, the Culture, Tourism and Centre for Education Statistics Division produces the estimates by combining the time series on the number of students with average tuition and adding estimates of other expenditure. For expenditures of Canadian students in the United States, the data have been supplied by the U.S. Bureau of Economic Analysis from 1981 onward and were linked with balance of payments data for prior years. Data on student expenditures overseas are updated by the Culture, Tourism and Centre for Education Statistics Division to incorporate volume and expenditure estimates. In recent years, lags in enrolment data have increased the scope for revision. A re-estimation since 1995 of foreign students studying in Canada has been made by the Culture, Tourism and the Centre for Education Statistics Division and linked at The revisions incorporate a more current estimate of the number of full time university students and the spending per student. The effect of these changes and changes in the air travel series are noted in the Annual Revisions section of , First Quarter Methods The Culture, Tourism and Centre for Education Statistics Division processes the monthly data on counts of travellers and the quarterly expenditure factors, and provides the spending results to the Balance of Payments Division. The latter division seasonally adjusts the quarterly travel expenditures. 3.1 General methodology Specific methodology is described in the Culture, Tourism and Centre for Education Statistics Division publication, International Travel, which is released annually. 3.2 Extended geographical breakouts Six geographical areas have long been the basis for balance of payments presentations-the United States, the United Kingdom, Other European Union, Japan, Other OECD and Other Countries. This presentation is still used for sub-annual and detailed presentations on services and continues to serve well, as the three countries identified separately often comprise a significant share of total services trade. In 2000, the present publication expanded the geographical breakout of total travel receipts and payments. For basic travel spending (covering some 80% of all travel outlays), estimates by country are available directly from the international travel survey. The other 20% of travel expenditures are not available for all individual countries and have to be allocated to countries within the three standard country groupings. Health-related transactions are 4. Prior to 1990, questionnaires for United States travellers visiting Canada were distributed to American residents on returning to their country by U.S. Customs officials. The questionnaires were processed by the U.S. Department of Commerce and the results were sent to Statistics Canada. Statistics Canada Catalogue no

7 allocated by basic travel spending in proportion to the travel undertaken. Travel specifically for obtaining medical treatment is taken as occurring largely with the United States, for which there is an existing estimate. Education-related receipts are proportioned by the number of foreign students; this information is collected from administrative sources. Note, however, that fees and living costs in Canada are not specific to a student s country of residency. Payments are estimated according to UNESCO data on the number of Canadian students who study abroad. The relative cost of living overseas is also taken into account, based on indexes developed by the Prices Division of Statistics Canada. Spending by foreign crews is dominated by airplane crew spending. The expenditures of foreign air crews is distributed by the supporting service outlays made by foreign airlines serving Canada (captured by a Balance of payments survey) and, in the case of payments, by the number of outward flights to first-stop destinations by Canadian carriers. The latter information is supplied to the Culture, Tourism and Centre for Education Statistics Division by the Transportation Division. 4. Products 4.1 Data accuracy The data accuracy on travel is acceptable. The counts of travellers are most reliable, while the response rates for the questionnaire on expenditure factors and other characteristics have remained low. It should be noted that earlier validation work included a prominent component of expenditures by Canadian travellers abroad-namely spending on goods. This was estimated for 1990 and 1991 through analysis of related administrative data. 5 With the data releases of the first quarter 2002, the coverage of spending by travellers moving through key airports has been raised as a result of new survey methodology and sample adjustment by the Culture, Tourism and Centre for Education Statistics Division. Response for overseas travel stood at 93% for 2000 and at 96% for the year 2001 and geographic patterns have been made more reliable. In co-operation with the Balance of Payments Division, CTCES produced link estimates to the latest unrevised year, 1997 and preliminary estimates for 2000 and Final estimates for 2000 and 2001 have been reported by CTCES in August With the first quarter 2003 release of Balance of Payments data, final data for 2001 and 2002 have been included and a new link with the most recent unrevised year (1998) was made again. Some breaks in the data in the mid-1990s result from additional coverage of receipts and payments for health-related travel. Unlike most goods and services, travel is collected on the basis of spending by the consumer, as opposed to being represented by sales of the provider. This approach to travel, set out in international standards, best ensures maximum coverage for balance of payments reporting. Whereas most trade data are presented on a commodity basis, travel includes both goods and services. Therefore commodity expenditures are not identified separately in the balance of payments statements. 4.2 Data accessibility The quarterly and annual series on travel are published as total receipts, payments and balances in Canada s Balance of International Payments, quarterly (available in print and in electronic format on the Internet) and in CANSIM. The series on travel are published in the present annual publication Canada s International Trade in Services, (also available in both print and electronic versions) and in CANSIM for the six geographical groupings: United States, United Kingdom, Other European Union, Japan, Other OECD and Other Countries. Additional quarterly and annual details are published for business and personal travel. 6 Business travel is further identified between crew spending and other business travel. Personal travel is further broken down between health, education and other travel. 5. Statistics Canada,, International Travel, 2000 (Catalogue no X, November, 2001). See Statistics Canada, Cross-Border Shopping-Trends and Measurement Issues, (National Accounts and Environment Division, Statistics Canada, Technical Series, no. 21, January 1991). 6. Beginning with the 1997 edition of this publication, a quarterly breakout of travel into business and personal travel spending was introduced from 1995 on a raw and seasonally adjusted basis. 86 Statistics Canada Catalogue no

8 A detailed geographic breakout for trading partners other than the United States, United Kingdom and Japan shows an annual time series of travel on a total basis from 1990-that is, inclusive of health, education and crew spending. These detailed breakouts began with the 1998 edition of Canada s International Trade in Services, and are also published in CANSIM. The Statistics Canada Culture, Tourism and Centre for Education Statistics Division publishes separate monthly, quarterly and annual releases on the outlays and other characteristics of travellers, for example through its annual release, International Travel. Statistics Canada Catalogue no

9 Transportation services 1. Concepts Transportation covers international revenues (receipts) and expenses (payments) arising from the transportation of goods and of cross-border travellers, as well as from supporting services related to transportation. The convention of valuing goods trade at the customs frontier of the exporting country affects the measurement of transportation, especially for overland forms of transportation. (For air and ocean carriers, the point of departure and the customs frontier are generally coincident.) For overland forms of transportation, the transportation services from the plant to the border will give rise to an entry in the transportation account of the balance of payments if the carrier is a non-resident of that country. Likewise, if a non-resident carrier provides the overland transportation service from the customs frontier to the destination, there will be an entry in the transportation account. Canadian practice generally conforms to international standards, except for the following transactions, which are under transportation in Canadian statistics but which international standards identify in other classes: cruise fares (international standards include these in travel); ship stores, which are not separately identified from port expenditures (international standards include these in goods); rentals without crews, which are not separately identified from charters with crews (international standards include these with equipment rentals in commercial services); and freight insurance, which is not separately identified from freight charges (international standards include this with insurance services in commercial services). In 2002, a reclassification of certain support services to air transport was made from commercial services. The shift to the transportation account beginning with 1998 brings treatment into line with current international standards. The international standards that call for a breakout by mode of transportation are not fully followed in Canada in the case of ocean transportation. For reasons of both confidentiality and quality, Canadian statistics combine ocean transport with that by inland waterway. International standards call for transport by inland waterway to be recorded as part of other transportation. 1.1 Receipts Canadian transportation receipts cover passenger revenues of Canadian carriers (the majority of which are airlines) from cross-border fares purchased by foreign travellers, and freight revenues earned from non-residents by Canadian carriers for transporting the following: Canadian exports beyond the borders of Canada; Canadian imports to the Canadian border; and foreign-owned goods both in transit through Canada and between foreign ports. Revenues earned by Canadian residents chartering vessels to non-residents are also included, as well as those earned by Canadian residents providing port services in Canada to foreign air and shipping carriers. 88 Statistics Canada Catalogue no

10 1.2 Payments Conversely, Canadian transportation payments cover cross-border passenger fares purchased by Canadian travellers from non-resident carriers (again, mainly airlines), and freight expenses incurred with nonresident carriers for transporting the following: Canadian imports from the Canadian border; Canadian exports to the Canadian border; and Canadian-owned goods between foreign ports. Expenditures of Canadian residents chartering vessels from non-residents are also included, as well as those of Canadian carriers acquiring port services abroad, largely for air- and water-borne transport, are also included. 1.3 Exclusions from transportation Transportation, as defined in the international standards, excludes the following transactions: revenues earned for transporting non-resident travellers once in the domestic economy (part of travel); major repairs and refits of ships and aircraft, which are included in goods; repairs to infrastructure (for example, to harbours and runways), which are included with construction services; time charters; and financial leases, which are treated as both financial transactions and goods. 1.4 Cross-border trucking The treatment of goods and inland transportation services is interdependent because goods transactions are valued at the customs border of the exporting country. The residency of the truck carriers and the location where transport is provided determine the entries for cross-border trucking services in the transportation account. Services provided by Canadian domiciled truckers beyond the Canadian border are recorded as transportation receipts whereas services provided by U.S. domiciled trucks within the Canadian border are treated as transportation payments. 2. Data sources 2.1 Passenger fares The Culture, Tourism and Center for Education Statistics Division estimates passenger fare receipts and expenditures. The monthly data on air travellers, provided by Canada Customs and Revenue Agency, are combined with estimates of average passenger fares, obtained from the quarterly sample survey of travellers. 2.2 Transportation of goods Transportation of goods by truck beyond the exporting country-which constitutes by far the largest component of the transportation account-is derived from customs documentation compiled by the International Trade Division for payments and by the U.S. Census Bureau for receipts. The components for earnings of Canadian truckers for the carriage of goods in the United States, as well as for expenses paid to U.S. truckers for transporting goods in Canada, are obtained from the U.S. Bureau of Economic Analysis (BEA). The BEA incorporates freight data from the customs data compiled by the International Trade Division of Statistics Canada. The other transportation components are derived from five annual surveys conducted by Statistics Canada s Balance of Payments Division: Great Lakes-St. Lawrence Seaway Shipping Transactions-BP-20; Statistics Canada Catalogue no

11 Report of Cargo, Earnings and Expenses of Ocean Vessels Operated by Non-resident Companies-BP-24; Report of Cargo, Earnings and Expenses of Ocean Vessels Operated by Canadian Companies-BP-25; Report on Imports of Crude Petroleum and Petroleum Products and Other Shipping Operations-BP-26; and Transactions of Foreign Airlines with Residents of Canada-BP-58. The mailing lists for these surveys are updated based on the Canadian Transportation Guide, Canadian Logistics, published annually by the Canadian Maritime Industries Association. This guide lists all companies engaged in the Canadian transport industry by sector, that is, by sea, air, land and rail. The mailing list is supplemented by information gathered from media coverage. For the surveys of shipping companies, the mailing list is further compared with information on shipping companies kept by the Transportation Division of Statistics Canada. 3. Methods 3.1 General methodology The Culture, Tourism and Centre for Education Statistics Division compiles the data on passenger fares. The Balance of Payments Division compiles the remaining information on transportation as follows. For estimates of trucking freight beyond the Canadian/ American border, most components of the calculation are taken from the U.S. Bureau of Economic Analysis, whose basic methodology is followed for this series. 1 Beginning with the reference year 1987, the earnings by Canadian-domiciled truckers comprise the freight for carrying exports within the United States to the U.S. destination and the freight for carrying goods from U.S. suppliers within the United States up to the U.S.- Canadian frontier. (Freight on the latter Canadian imports for the remaining journey within Canada is classified as a resident-to-resident transaction, outside the scope of balance of payments.) In the opposite direction, since 1981, the payments made to U.S.-domiciled truckers have included the payments made for carrying imports within Canada from the Canadian border to their destination in Canada, as well as the payments to carry Canadian exports in Canada up to the Canadian border. For the surveys, where regular follow-ups do not produce sufficient data, amounts are imputed based on prior responses and available external information. The survey results are often combined with other sources. For example, in the 1997 historical series, the methodology was adapted to increase the coverage of global payments abroad for the transport by sea of imports. The basic survey of non-oil imports was closely re-edited to calculate unit values. The unit values were then multiplied by international shipping tonnage unloaded at Canadian ports as compiled by the Transportation Division of Statistics Canada. The tonnage activity is largely handled by non-resident carriers. 3.2 Extended geographical breakouts Some larger series in the transportation sector are regularly reported for a range of individual countries at source, such as international passenger fares from the travel survey and the port expenditures in Canada reported by individual foreign airlines. In other instances, such as cross-border trucking earnings or smaller series on earnings from in-transit movements, no special allocation is required as they occur only with the United States. Otherwise, statistics for the United States, Japan, United Kingdom, Other European Union, Other OECD and Other Countries are collected at source, or through other established estimates. Earnings of Canadian-operated shipping on outward cargo are allocated to individual countries in the last three partner trading blocks according to volumes loaded for specific countries based on data from the Transportation Division. Other large series, such as freight payments to vessels operated by non-resident interests or charters, cannot suitably be estimated only according to cargo volumes unloaded or by waterborne import values. What is relevant in these cases is the shipping interests 1. A description of the U.S. treatment appears on page 70 of the June 1, 1995 issue of the U.S. Department of Commerce publication, Survey of Current Business. 90 Statistics Canada Catalogue no

12 that paid for the service rather than the origin of the cargo. In such a case, a typical allocator used is the shipping tonnage by country of domicile, including the portion of openregistry shipping managed by each country (tabulations from United Nations Conference on Trade and Development [UNCTAD]). 4. Products 4.1 Data accuracy Data accuracy is acceptable. The structure of Canada s transportation services account has undergone substantial change over the years. The pattern of trade in goods plays a preponderant role in the transportation account. A large portion of Canada s trade in goods is now with the United States, which in turn leads to more transportation inland, and the attendant difficulties of measuring inland freight. There are major difficulties in delineating transportation services on the basis of the residency of the carriers, especially for trucking. For example, in the estimation of cross-border trucking, the northbound freight on goods used by the U.S. Bureau of Economic Analysis is supplied by the International Trade Division from Canadian customs records, which show the whole journey rather than only inland freight to the border. This whole journey measure is useful for the series in question, but within this, the shares by domiciled carriers are difficult to discern. In the past, a higher percentage of trade was with overseas countries. The carriage of Canada s trade by ships under Canadian registry has declined considerably in the postwar period. The fact that Canada s foreign trade is now carried to a larger extent by foreign-operated carriers has led to methods such as the unit valuation (see section 3.1) to raise coverage when less than complete information is available at source. In addition, since deregulation of air services in the late 1980s, reporting has been less than complete for air freight receipts and on payments for supporting landside services, especially geographic breakouts. The extensive detailed annual reconciliation on current account transactions, which is conducted with the U.S. Bureau of Economic Analysis, assists in the data estimation process as well as in validation. 2 Certain payments on bilateral air freight and landside services benefit from U.S. estimates, reflecting incomplete information obtained from the Canadian source. Water and air transportation is derived from a number of small customized BOP surveys conducted annually (the coverage ranging from 7 to 47 firms, depending on the survey). Response rates on four vessel surveys for 2002 averaged 61%, while a survey of 55 foreign airlines serving Canada showed a response rate of 65%. 4.2 Data accessibility The quarterly and annual series on transportation covering total receipts, payments and balances are published in the quarterly Canada s Balance of International Payments (available in print and in electronic format on the Internet) andincansim. The annual transportation series are also published in the present annual publication Canada s International Trade in Services (available in print and in electronic format on the Internet) and in CANSIM with breakdowns for the six geographic groupings: United States, United Kingdom, Other European Union, Japan, Other OECD and Other Countries. This publication also has transport series by major mode: water, air, land and other transport. Air transport, land transport and other transport are in turn divided on an annual basis between passenger services and freight and auxiliary services. Water transport, which combines ocean freight and inland waterway transportation, is broken down annually by freight and auxiliary services. Beginning with the 1998 issue, annual totals for transportation are also available (with a year s lag) for a wide range of individual countries from 1990 onward. These series are published in combination with government services, which are very small by comparison. Estimates showing transportation separately can be made available on enquiry. 2. "Reconciliation of the Canada-United States Current Account," in Statistics Canada, Canada s Balance of International Payments, Third Quarter, 2004 (Catalogue no X). Statistics Canada Catalogue no

13 Commercial services 1. Concepts Concepts underlying these data reflect those for services generally. Prominent among cross-border services are those described in Canadian statistics as commercial services. 1 Specific breakouts are described below. Particulars as to provenance and accuracy are noted as part of this section, with a general overview taken up in the section that follows. The following main categories are all published. In addition, subcategories that are published separately in the tabular section of Canada s International Trade in Services are in italics Communication services Communication services covers postal and courier services: the pick-up, transport and delivery of letters, other printed matter, parcels and packages, together with postal outlet services; and telecommunications services: basic services such as telephone, telex, data and facsimile transmission; and enhanced or value-added services such as , electronic data interchange (EDI) or teleconferencing. Included are charges to and from abroad by public carriers and interconnected suppliers for the use of facilities that teletransport client information, together, as a matter of practicality, with fees for related consulting and facilities management reported at source. Charges for the use and management of private facilities (non-public carriers) for teletransporting client information to and from abroad are included and carriage of third party or transit services are also covered. The value of the subject matter teletransported is excluded where possible. Lastly it is noted that limited coverage of internet access provision and enabling services for the internet are presently assigned to Information services below. There is no separation of postal and courier data for reasons of confidentiality. Data are derived from the annual survey of international transactions in services and from specific information supplied by industry participants. 1.2 Construction services Construction services covers the erection of structures, structural repairs, installation, refurbishing, special trades, demolition and site work. Service suppliers are asked to estimate the construction portion in the case of a turnkey project, or to judge where to assign its entire value between, for example, construction and the architectural and engineering services category. Rentals of construction equipment are excluded, appearing instead with equipment rentals (see section 1.8). According to international standards, goods supplied directly to or from Canada should be recorded with construction services. However, such goods are left with the trade in goods in Canadian statistics and, to the extent that they may be also reported in surveys of construction services, there will be duplication in the goods and services accounts. 1. As noted earlier, commercial services is a term of convenience used in Canadian statistical presentations to summarize services other than travel, transportation and government. The term is also used by the World Trade Organization to refer to services other than government. Technically it would be more accurate for the Canadian term to read other services. It seemed, however, that a description containing other would indicate that this major block of trade was a residual class that is not correct for most of its subcategories. 2. In 1996 and in 1997, the services data, notably commercial services, were restated according to the 1993 international standards. For more detail, please refer to Hugh Henderson, Implementation in Canada of the International Standards for Services Trade-On with the Fifth, (Research Paper No. 13, Balance of Payments Division, (67F0001MIB97013), english/services, Statistics Canada, Ottawa, 1997). 92 Statistics Canada Catalogue no

14 Furthermore, the Canadian expenditures related to revenues of construction services, such as expenditures for local supplies, are classified as construction payments in Canadian statistics. This treatment aligns with that recently adopted by the new UN manual on services trade statistics. Projects extending beyond a year are still classified as cross-border services, unless the service suppliers themselves have established foreign enterprises. In other words, in Canadian statistics, regardless of the length of the contract, construction is classified as cross-border construction services if the suppliers record them as such in their books, or as direct investment if the suppliers set up foreign enterprises to manage their construction activities. This approach differs from to international standards, which typically treat site offices as direct investment: Construction involving major specific projects that often take several years to complete, are carried out and managed by non-resident enterprises through unincorporated site offices. In most instances, site offices will meet the criteria that require site office production to be treated as the production of a resident unit and as part of the production of the last economy rather than as an export of services to that economy. 3 Construction was surveyed as a separate category for the first time in From 1990 to 1994, a proportion of results from selected survey returns in a previous broad grouping on consulting and other professional services was used. Construction activity prior to 1990 is included with the category architectural, engineering and other technical services (see section 1.12). 1.3 Insurance services Insurance services covers the provision of various types of insurance to non-residents by resident insurance companies and vice versa. Broker and agency commissions related to insurance are included. Data cover life insurance, pension and annuity services, as well as other direct insurance. Compulsory social security services are excluded. Other direct insurance covers private sector accident and health, property, casualty and other liability risks, such as financial or vehicular. Reinsurance, or the subcontracting of risk, is also included. No separate category is attempted for freight insurance. Some elements may be indistinguishably included with other direct insurance and/or be embedded in the valuation of freight charges shown as goods or with transportation services. No explicit provisions are made for some auxiliary services, such as claims adjustment and salvage administration. The Canadian statistics are shown on the basis of gross premiums and claims, a departure from international standards. 4 Receipts are the sum of premiums received by Canadian residents from abroad and claims paid to clients in Canada by non-resident insurers. Payments for their part are the sum of claims paid abroad by insurers resident in Canada, and premiums paid to outside insurers by policyholders in Canada. From 1990, the annual insurance series are subdivided into four subcategories: Primary life and non-life represents the premiums and claims of insurance carriers. The largest majority of international transactions are by far non-life in nature. Health and term life insurance are not excluded, although this is called for by international standards. However, compulsory social insurance transactions are excluded. Finally, no distinguishable component of freight has been identified in non-life insurance, although this is called for by international standards. Reinsurance-life covers subcontracted risk on life insurance in return for a proportional share of the premium income. Reinsurance-non-life, as a further significant set of international insurance transactions, covers other subcontracted risk, often to specialized operators. Insurance commissions covers commissions by brokers and agencies and commissions identified by carriers. Data for insurance companies are obtained annually from Balance of Payments Division surveys of Canadian and foreign insurers in Canada, supplemented by the annual survey of international transactions in services, and a small 3. International Monetary Fund, Balance of Payments Manual, (Fifth edition, IMF Publication Services, th Street NW, Washington DC USA, 1993), paragraph 78, The international standards call for a rearrangement of gross premiums and claims data into two separate components. The first is a service charge (premiums earned less claims expensed) that would be entered as the insurance service. The other component, which is the difference between gross premiums and the service charge plus claims payable, would be entered in the case of life insurance under other investment of the financial account, and for non-life insurance under transfers in the current account. Statistics Canada Catalogue no